Lockdowns weighed heavily on business confidence, says NAB

Highlights

  • National Australia Bank has recently released its quarterly business survey for September 2021 quarter.
  • NAB stated that the biggest fall in consumer and business confidence has been seen in NSW and Victoria.
  • NAB and firms have shown optimism for the coming months, owing to rapid growth in vaccination rates and the buildup of resilience in the economy.

In a series of latest developments reflecting the impact of lockdowns in Australia, business confidence has reportedly declined during the third quarter of 2021. National Australia Bank (NAB) has recently released its quarterly business survey for September 2021 quarter, revealing a fall in business confidence by 19 points to -1.1 index points.

 Business confidence for Q3 decline to -1.

The fall, however, did not come as a surprise to policy experts and economists due to the widespread lockdowns that marked the initial weeks of the September quarter. Though now, the situation has been brought under control with a robust rollout of vaccines and prompt containment measures. However, its far-reaching impact can still be felt across Australian businesses and the labour market.

Lockdowns weighed heavily on business confidence: NAB

As per NAB, the biggest fall in consumer and business confidence has been seen in New South Wales and Victoria, the two states holding prime financial significance for Australia. On the brighter side of things, the fall in confidence showed an improvement over last year’s fall when COVID had initially struck. Consequently, the Australian economy has been able to build resilience from the first shock it received in 2020.

Here is a closer look at what the coming months could bring for the Australian economy.

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A closer look at NAB’s data

NAB’s report suggests that current business conditions have dropped from 30 index points in the second quarter to 13 index points in the third quarter. Moreover, the business conditions for the next three months have dropped from 35 index points in the second quarter to 8 index points in the September quarter. Capital expenditure plans for the next 12 months have also declined from 37 index points to 26 index points in the third quarter, while profitability has dropped from 30 to 11 index points and employment indicator from 23 to 11 index points. Amid these worrying figures, NAB continues to remain confident about the longevity of Australia’s ongoing recovery.

Firms have reciprocated the optimism shown by NAB for the business confidence in the upcoming quarter. Backed by expected growth in employment and a larger capital investment, many are hopeful that the following months would be crucial in changing the course for the Australian economy.

Fast vaccine rollouts are behind the buildup of an optimistic outlook.

Additionally, the threat of the delta variant, which wreaked havoc in June 2021 and in the following months, has been kept in check with a fast rollout of vaccinations. Post September 2021, vaccination rates have surged drastically. Moreover, lockdowns are also in the process of being removed completely, and major cities could soon be fully reopened, with businesses flourishing in full swing.

This positive outlook has been the basis on which an improvement in business confidence has been foreshadowed for the coming months. Thus, the residual strength from the previous recovery is expected to help the Australian economy stay resilient in the coming months.

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